They should just hand out patches written in Thai that you can add to your shorts.

It should say something like "I am more competent in ass-kicking than before. Fear me." and since it would be written in Thai, it would wrap around your waist anyway. It would be just like a belt without being McDojo-y.

But how long before people forget about the actual "being able to fight" part and starts to focus more on the "getting the next belt level" bit?

Everybody's saying that this and that martial art was super-hardcore back in the day before mainstream MA marketing, belt factories and increased commercialization of martial arts. You could be saying this about muay thai some day.

Adopting belts/grades as a form of encouraging students is NOT a good sign.